The Legality of Cryptocurrency

You’ve probably heard of Bitcoin, the first and most widely traded digital currency (Bitcoin’s value peaked at $19,000 in December). However, Bitcoin is not the only form of so-called cryptocurrency. At the time of this article’s publication, CoinMarketCap, the most popular market capitalization resource for cryptocurrency, lists 1455 valid cyber coins being traded on 7522 different markets.

Digital currencies first showed up in 2009, when Bitcoin was released as an open-source blockchain. Since then, the market has exploded. Corporations such as American Express and Microsoft have partnered with certain blockchain-supported currencies in order to facilitate long-distance transactions. Investors all over the world trade coins in hopes that digital dollars will power the future.

Cryptocurrency stands out from other types of money in many ways, but most notably for their decentralization. Because they are built upon virtual software, no government can claim digital currency as official minted specie.

This appeals to the public because there is no established authority when it comes to blockchain technologies. Less regulation, more profit. So people keep trading coins and their value goes up.

As you can imagine, this makes countries incredibly uneasy. Millions of citizens are making bank and the government gets none of it. Why? Because cryptocurrency isn’t federally issued money, so all transactions that take place are beyond the IRS’s grasp.

Which raises the question: should this independent digital money system be considered legal tender? How can nations around the world tax virtual possessions?

China represents an extreme solution. Earlier this month, the government banned the “mining” (digital formulation) and trading of all cryptocurrencies. This left a huge gap in the market, sending the value of nearly every coin on the market down by an average of 26%. Other countries, like Venezuela, are embracing this technology and finding ways to integrate it into the national economy.

In the United States, the IRS released a special announcement in 2014, introducing “convertible virtual currency” as taxable under the same laws governing property tax. Since cryptocurrency is a digital asset, however, many Americans object to intensive taxation.

Congress’s new tax plan could also add regulations onto this international trend. Future or not, cryptocurrency is an intriguing issue at the forefront of our changing world.

jalonso, Morguefile

Bio
Latest Posts

Samuel Judd

Samuel Judd enjoys writing, thinking, and listening to all kinds of music. He is passionate about philosophy, history, and international law, and he firmly believes in the Oxford comma. In addition to playing cello and piano, Sam drums in the OHS drumline and is the drum major of the OHS marching band.